Real Convergence, Capital Flows, and Competitiveness in Central and Eastern Europe

34 Pages Posted: 6 Nov 2009

See all articles by Ansgar Hubertus Belke

Ansgar Hubertus Belke

University of Duisburg-Essen - Department of Economics and Business Administration; IZA Institute of Labor Economics; Centre for European Policy Studies

Gunther Schnabl

University of Leipzig - Institute for Economic Policy

Holger Zemanek

University of Leipzig - Institute for Economic Policy

Multiple version iconThere are 4 versions of this paper

Date Written: October 2009

Abstract

The paper scrutinizes the role of wages and capital flows for competitiveness in the new EU member states in the context of real convergence. For this purpose it extends the seminal Balassa-Samuelson model by international capital markets. The augmented Balassa-Samuelson model is linked to the monetary overinvestment theories of Wicksell and Hayek in order to trace cyclical deviations of real exchange rates from the productivity-driven equilibrium path. Panel estimations for the period from 1993 to 2008 reveal mixed evidence for the role of capital markets for both the economic catch-up process and international competitiveness of the Central and Eastern European countries.

Keywords: exchange rate regime, wages, Central and Eastern Europe, EMU accession, panel model

JEL Classification: E24, F16, F31, F32

Suggested Citation

Belke, Ansgar Hubertus and Schnabl, Gunther and Zemanek, Holger, Real Convergence, Capital Flows, and Competitiveness in Central and Eastern Europe (October 2009). CESifo Working Paper Series No. 2835, Available at SSRN: https://ssrn.com/abstract=1500271

Ansgar Hubertus Belke

University of Duisburg-Essen - Department of Economics and Business Administration ( email )

Universitätsstr. 9
Essen, 45141
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for European Policy Studies ( email )

1 Place du Congres, 1000
Brussels, 1000
Belgium

Gunther Schnabl (Contact Author)

University of Leipzig - Institute for Economic Policy ( email )

Institute for Economic Policy
Grimmaische Straße 12
Leipzig, 04109
Germany

HOME PAGE: http://www.wifa.uni-leipzig.de/iwp/

Holger Zemanek

University of Leipzig - Institute for Economic Policy ( email )

Institute for Economic Policy
Grimmaische Strasse 12
Leipzig, 40109
Germany

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